Reward Group announces bankruptcy reorganization06-12-2019 2555

On June 5, Reward
Scientific and Technological Industry Group Co., Ltd, known as Reward Group,
made an announcement about its bankruptcy reorganization on the official
website of Shanghai Stock Exchange.

Earlier in
April this year, Reward Group, together with its wholly-owned subsidiaries
Shuangwa Dairy Co., Ltd and Reward Homecare Chemical Co., Ltd, filed for
bankruptcy due to the failure of repayment of debt.On May 13, the People’s Court of Chaoyang District
in Beijing ruled that the bankruptcy reorganization of Reward Group was valid.

According
to the court’s ruling, by December 31, 2018, Reward Group has total assets of USD1.63
billion (RMB11.24 billion), liabilities of USD0.88 billion (RMB6.09 billion),
and monetary funds of only USD26.85 million (RMB185 million). In the meanwhile,
Shuangwa Dairyholds
total assets of USD0.48 billion (RMB3.34 billion), liabilities of
USD0.3 billion (RMB2.04 billion), as well as monetary funds of only USD23.37
million (RMB161 million).

Reward Group said that despite a larger amount of book assets of the company and its subsidiaries, insufficiency of monetary funds is in a serious
situation. As guarantee of loans, a part of the monetary funds is unable to be
withdrawn. Besides, the rest of assets also has difficulty with monetization.
Hence, the company fails to meet its liabilities.

As the
announcement demonstrates, at the moment some investors have expressed interest in a
strategic investment of Reward Group, Shuangwa Dairy and Reward Homecare
Chemical, with an on-going negotiation of the business plan. Reward Group said
that the company might solve the debt crisis through debt-for-equity swaps.

Despite its prosperous past, Reward Group left
with bankruptcy

Founded in
1994, Reward Group is a large private enterprise integrated with real estate, home
care chemicals, and dairy. It is shown on the company official website that its
subsidiary, Shuangwa Dairy has become a milk powder enterprise with its own
complete industrial chain, including possession of grasslands, forage and feed,
cow-breeding, milk powder processing, research and development, as well as
retail terminal. The large forage base, feed mill, dairy-product plant, and the cow-breeding base are located in
the area of Hulun Buir.

Reward
Group used to earn a lot of reputation with famous Chinese celebrities as image
speakers for its brand. Moreover, one of its products, the Reward detergent, earned
its popularity by showing up in different entertainment shows and TV dramas.

In
addition, in June 2018, Reward Group earned an honorary title of “top 100
enterprises with special capacity of light industry in 2017”. In October,
Reward Group was ranked in the 34th place in the list of “top 100
private enterprises of Beijing in 2018”.

Half of employees leave Shuangwa Dairy, but the
operation goes on

It is
reported that since December last year the employees of Shuangwa Dairy have been
facing an overdue payment due to the debt default of Reward Group. During that
time almost half of the employees have already quit the job, leaving two or
three people in one department.

Nevertheless,
in light of the fact that Shuangwa Dairy has been the best equity of Reward
Group, operations in the aspects of farmhouse, raw milk powder, and formula
milk powder for infants still go on, with materials in supply.

Reward Homecare Chemical withdraws parts of its
distribution channels

Compared
with the dairy business, Reward Homecare Chemical is involved in a much
worse situation. Some insiders revealed that a number of raw materials
suppliers have quit supplying right after the debt crisis happening to Reward
Group. At the moment, Reward Homecare Chemical has not disclosed information of
discontinuing the production. However, some customer service staff said that
the company still keeps manufacturing, but because of the financial issue, some
of distribution channels will be withdrawn in order to avoid high entrance fees
for physical stores. For personal purchase, online ordering is available.

Besides,
according to the company’s official information, the business department of Reward
Homecare Chemical held a reform launching ceremony on April 28 this year to divide
production and sales into nine units with separate accounts.